vijay madanlal case.pdf

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REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014
VIJAY MADANLAL CHOUDHARY & ORS. ...PETITIONER(S)
VERSUS
UNION OF INDIA & ORS. ...RESPONDENT(S)
WITH
SPECIAL LEAVE PETITION (CIVIL) NO. 28394 OF 2011
SPECIAL LEAVE PETITION (CRIMINAL) NO.............OF 2022
(@ DIARY NO. 41063 OF 2015)
SPECIAL LEAVE PETITION (CRIMINAL) NO.10018 OF 2015
Digitally signed by
DEEPAK SINGH
Date: 2022.07.27
11:48:08 IST
Reason:
Signature Not Verified

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TRANSFER PETITION (CRIMINAL) NO. 150 OF 2016
TRANSFER PETITION (CRIMINAL) NOS.151-157 OF 2016
WRIT PETITION (CRIMINAL) NO. 152 OF 2016
CRIMINAL APPEAL NO. 1269 OF 2017
CRIMINAL APPEAL NOS. 1271-1272 OF 2017
SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022
(@ DIARY NO(S). 9360 OF 2018)
(@ DIARY NO(S). 9365 OF 2018)

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(@ DIARY NO(S). 17000 OF 2018)
(@ DIARY NO(S). 17462 OF 2018)
(@ DIARY NO(S). 20250 OF 2018)
(@ DIARY NO(S). 22529 OF 2018)
SPECIAL LEAVE PETITION (CRIMINAL) NOS. 1701-1703 OF 2018

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TRANSFERRED CASE (CRIMINAL) NO. 3 OF 2018
TRANSFER PETITION (CIVIL) NO. 1583 OF 2018

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WRIT PETITION (CIVIL) NO. 1401 OF 2020
(@ DIARY NO(S). 8626 OF 2021)
(@ DIARY NO(S). 31616 OF 2021)
(@ DIARY NO. 11605 OF 2021)

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SPECIAL LEAVE PETITION (CIVIL) NOS. 8764-8767 OF 2021
TRANSFER PETITION (CRIMINAL) No. 435 OF 2021
WRIT PETITION (CIVIL) No. 56 OF 2021

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J U D G M E N T
A.M. KHANWILKAR, J.
Table of Contents
Particulars Paragraph No(s).
Preface 1(a)-(d)
Submissions of the Private Parties
• Mr. Kapil Sibal, Senior Counsel 2(i)–(xxiii)
• Mr. Sidharth Luthra, Senior Counsel 3(i)–(iii)
• Dr. Abhishek Manu Singhvi,
Senior Counsel
4(i)–(ix)

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• Mr. Mukul Rohatgi, Senior Counsel 5(i)-(iii)
• Mr. Amit Desai, Senior Counsel 6(i)-(iii)
• Mr. S. Niranjan Reddy, Senior Counsel 7(i)-(ii)
• Dr. Menaka Guruswamy,
Senior Counsel
8(i)-(v)
• Mr. Aabad Ponda, Senior Counsel 9(i)-(ii)
• Mr. Siddharth Aggarwal, Senior Counsel 10(i)-(iii)
• Mr. Mahesh Jethmalani, Senior Counsel 11(i)-(iii)
• Mr. Abhimanyu Bhandari, Counsel 12(i)-(iv)
• Mr. N. Hariharan, Senior Counsel 13
• Mr. Vikram Chaudhari, Senior Counsel 14(i)-(v)
• Mr. Akshay Nagarajan, Counsel 15
Submissions of the Union of India
• Mr. Tushar Mehta,
Solicitor General of India
16(i)-(lxxx)
• Mr. S.V. Raju,
Additional Solicitor General of India
17(i)-(lxvi)
Consideration
• The 2002 Act 19-22
• Preamble of the 2002 Act 23-24
• Definition Clause 25-36
• Section 3 of the 2002 Act 37-55
• Searches and Seizures 77-86
• Search of persons 87

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• Arrest 88-90
• Burden of proof 91-103
• Special Courts 104-114
• Bail 115-149
• Section 63 of the 2002 Act 174
• Schedule of the 2002 Act 175 & 175A
• ECIR vis-à-vis FIR 176-179
• ED Manual 180-181
• Appellate Tribunal 182
• Punishment under Section 4 of the
2002 Act
183-186
Conclusion 187(i)-(xx)
Order 1-7
PREFACE
1. In the present batch of petition(s)/appeal(s)/case(s), we are
called upon to deal with the pleas concerning validity and
interpretation of certain provisions of the Prevention of Money-
Laundering Act, 20021 and the procedure followed by the
1 For short, “PMLA” or “the 2002 Act”

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Enforcement Directorate2 while inquiring into/investigating offences
under the PMLA, being violative of the constitutional mandate.
(a) It is relevant to mention at the outset that after the decision of
this Court in Nikesh Tarachand Shah vs. Union of India & Anr.3,
the Parliament amended Section 45 of the 2002 Act vide Act 13 of
2018, so as to remove the defect noted in the said decision and to
revive the effect of twin conditions specified in Section 45 to offences
under the 2002 Act. This amendment came to be challenged before
different High Courts including this Court by way of writ petitions.
In some cases where relief of bail was prayed, the efficacy of
amended Section 45 of the 2002 Act was put in issue and answered
by the concerned High Court. Those decision(s) have been assailed
before this Court and the same is forming part of this batch of cases.
At the same time, separate writ petitions have been filed to challenge
several other provisions of the 2002 Act and all those cases have
been tagged and heard together as overlapping issues have been
raised by the parties.
2 For short, “ED”
3 (2018) 11 SCC 1

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(b) We have various other civil and criminal writ petitions, appeals,
special leave petitions, transferred petitions and transferred cases
before us, raising similar questions of law pertaining to
constitutional validity and interpretation of certain provisions of the
other statutes including the Customs Act, 19624, the Central Goods
and Services Tax Act, 20175, the Companies Act, 20136, the
Prevention of Corruption Act, 19887, the Indian Penal Code, 18608
and the Code of Criminal Procedure, 19739 which are also under
challenge. However, we are confining ourselves only with challenge
to the provisions of PMLA.
(c) As aforementioned, besides challenge to constitutional validity
and interpretation of provisions under the PMLA, there are special
leave petitions filed against various orders of High
Courts/subordinate Courts across the country, whereby prayer for
grant of bail/quashing/discharge stood rejected, as also, special
4 For short, “1962 Act” or “the Customs Act”
5 For short, “CGST Act”
6 For short, “Companies Act”
7 For short, “PC Act”
8 For short, “IPC”
9 For short, “Cr.P.C. or “the 1973 Code”

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leave petitions concerned with issues other than constitutional
validity and interpretation. Union of India has also filed
appeals/special leave petitions; and there are few transfer petitions
filed under Article 139A(1) of the Constitution of India.
(d) Instead of dealing with facts and issues in each case, we will be
confining ourselves to examining the challenge to the relevant
provisions of PMLA, being question of law raised by parties.
SUBMISSIONS OF THE PRIVATE PARTIES
2. Mr. Kapil Sibal, learned senior counsel appearing for the
private parties/petitioners in the concerned matter(s) submitted that
the procedure followed by the ED in registering the Enforcement
Case Information Report10 is opaque, arbitrary and violative of the
constitutional rights of an accused. It was submitted that the
procedure being followed under the PMLA is draconian as it violates
the basic tenets of the criminal justice system and the rights
enshrined in Part III of the Constitution of India, in particular
Articles 14, 20 and 21 thereof.
10 For short, “ECIR”

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(i) A question was raised as to whether there can be a procedure
in law, where penal proceedings can be started against an individual,
without informing him of the charges? It was contended that as per
present situation, the ED can arrest an individual on the basis of an
ECIR without informing him of its contents, which is per se arbitrary
and violative of the constitutional rights of an accused. The right of
an accused to get a copy of the First Information Report10A at an early
stage and also the right to know the allegations as an inherent part of
Article 21. Reference was made to Youth Bar Association of India
vs. Union of India & Anr.11 in support of this plea. Further, as per
law, the agencies investigating crimes need to provide a list of all the
documents and materials seized to the accused in order to be
consistent with the principles of transparency and openness12. It
was also submitted that under the Cr.P.C., every FIR registered by
an officer under Section 154 thereof is to be forwarded to the
jurisdictional Magistrate. However, this procedure is not being
followed in ECIR cases. Further, violation of Section 157 of the
10A For short, “FIR”
11 (2016) 9 SCC 473 (Para 11.1); and Court on its Own Motion vs. State, 2010 SCC OnLine Del
4309 (Paras 39 & 54)
12 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. State of Andhra
Pradesh & Ors., (2021) 10 SCC 598 (Para 11); also see: Nitya Dharmananda & Anr. vs. Gopal
Sheelum Reddy & Anr., (2018) 2 SCC 93 (Para 8).

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Cr.P.C. was also alleged and it was submitted that this has led to
non-compliance with the procedure prescribed under the law
(Cr.P.C.) and the law laid down by this Court in catena of decisions.
It was vehemently argued that in some cases the ECIR is voluntarily
provided, while in others it is not, which is completely arbitrary and
discriminatory.
(ii) It was argued that as per definition of Section 3 of the PMLA,
the accused can either directly or indirectly commit money-
laundering if he is connected by way of any process or activity with
the proceeds of crime and has projected or claimed such proceeds
as untainted property. In light of this, it was suggested that the
investigation may shed some light on such alleged proceeds of crime,
for which, facts must first be collected and there should be a
definitive determination whether such proceeds of crime have
actually been generated from the scheduled offence. Thus, there
must be at least a prima facie quantification to ensure that the
threshold of the PMLA is met and it cannot be urged that the ECIR
is an internal document. Therefore, in the absence of adherence to

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the requirements of the Cr.P.C. and the procedure established by
law, these are being violated blatantly13.
(iii) An anomalous situation is created where based on such ECIR,
the ED can summon accused persons and seek details of financial
transactions. The accused is summoned under Section 50 of the
PMLA to make such statements which are treated as admissible in
evidence. Throughout the process, the accused might well be
unaware of the allegations against him. It is clear that Cr.P.C. has
separate provisions for summoning of the accused under Section
41A and for witnesses under Section 160. The same distinction is
absent under the PMLA. Further, Chapter XII of the Cr.P.C. is not
being followed by the ED and, as such, there are no governing
principles of investigation, no legal criteria and guiding principles
which are required to be followed. As such, the initiation of
investigation by the ED, which can potentially curtail the liberty of
the individual, would suffer from the vice of Article 14 of the
Constitution of India14
.
13 Lalita Kumari vs. Government of Uttar Pradesh and Ors., (2014) 2 SCC 1 (Para 120.1)
14 E.P. Royappa vs. State of Tamil Nadu & Anr., (1974) 4 SCC 3; also see: S.G. Jaisinghani vs.
Union of India and Ors, (1967) 2 SCR 703 and Nikesh Tarachand Shah, (supra at Footnote No.3)
(Paras 21-23).

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(iv) Mr. Sibal, while referring to the definition of “money-
laundering” under Section 3 of the PMLA, submitted that the ED
must satisfy itself that the proceeds of crime have been projected as
untainted property for the registration of an ECIR or the application
of the PMLA. It has been vehemently argued that the offence of
money-laundering requires the proceeds of crime to be mandatorily
‘projected or claimed’ as ‘untainted property’. Meaning thereby that
Section 3 is applicable only to the generation of proceeds of crime,
such proceeds being projected or claimed as untainted property. It
is stated that the pertinent condition of ‘and’ projecting or claiming
cannot be ousted and made or interpreted to be ‘or’ by the
Explanation that has been brought about by way of the amendment
made vide Finance (No.2) Act, 2019. It has been submitted that such
an act would also be unconstitutional, as being enlarging the ambit
of a principal section by way of adding an Explanation.
(v) It is also stated that the general practice is that the ED registers
an ECIR immediately upon an FIR of a predicate offence being
registered. The cause of action being entirely different from the
predicate offence, as such, can lead to a situation where there is no
difference between the predicate offence and money-laundering. In

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support of the said argument, reliance was placed on the Article 3 of
the Vienna Convention15
, where words like “conversion or transfer of
property”, “for the purpose of concealing or disguising the illicit
origin of the property or of assisting any person who is involved in
the commission of such an offence or offences to evade the legal
consequences of his actions”, have been used. It is urged that what
was sought to be criminalised was not the mere acquisition and use
of proceeds of crime, but it was the conversion or transfer for the
purpose of either concealing or disguising the illicit origin of the
property to evade the legal consequences of one’s actions. Reference
was also made to the Preamble of the PMLA which refers to India’s
global commitments to combat the menace of money-laundering.
Learned counsel has then referred to the definition of “money-
laundering” as per the Prevention of Money-Laundering Bill, 199916
to show how upon reference to the Select Committee of the Rajya
Sabha, certain observations were made and, hence, the amendment
was effected, wherein the words “and projecting it as untainted
15 United Nations adopted and signed the Convention against Illicit Traffic in Narcotic Drugs
and Psychotropic Substances (hereinafter referred to as “Vienna Convention” or “the 1988
Convention” or “the UN Drugs Convention”, as the case may be)
16 For short, “1999 Bill”

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property” were added to the definition which was finally passed in
the form of PMLA. We have reproduced the relevant
sections/provisions hereinbelow at the appropriate place. Reliance
has also been placed on the decision of Nikesh Tarachand Shah17
.
(vi) The safeguard provided by Section 173 of the Cr.P.C., it is
argued, was present in the original enactment of 2002 (PMLA). The
same has now supposedly been whittled down by various
amendments over the years. It has been submitted that by way of
amendments in 2009, proviso have been added to Sections 5 and
17, which have diluted certain safeguards. Further, it is submitted
that the safeguard under Section 17(1) has been totally done away
with in the amendment made in 2019. To further this argument, it
has been suggested that the filing of chargesheet in respect of a
predicate offence was impliedly there in Section 19 of the PMLA,
since there is a requirement which cannot be fulfilled sans an
investigation, to record reasons to believe that ‘any person has been
guilty of an offence punishable under this Act’. In respect of Section
50, it is urged that though there is no threshold mentioned in the
17 Supra at Footnote No.3 (Para 11)

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Act, yet the persons concerned should be summoned only after the
registration of the ECIR. It is, thus, submitted that any attempt to
prosecute under the PMLA without prima facie recordings would be
inconsistent with the Act itself and violative of the fundamental
rights.
(vii) It is urged that the derivate Act cannot be more onerous than
the original. It is suggested that the proceeds of crime and the
predicate offence are entwined inextricably. Further, the
punishment for generation of the proceeds of crime cannot be
disproportionate to the punishment for the underlying predicate
offence. The same analogy ought to apply to the procedural
protections, such as those provided under Section 41A of the
Cr.P.C., which otherwise would be foul of the constitutional
protections under Article 21.
(viii) Learned counsel has also challenged the aspect of the
Schedule being overbroad and inconsistent with the PMLA and the
predicate offences. It is argued that even in the Statements of
Objects and Reasons of the 1999 Bill, it has been stated that the Act
was brought in to curb the laundering stemming from trade in
narcotics and drug related crimes. Reference is also made to the

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various conventions that are part of the jurisprudence behind the
PMLA18
. It was to be seen in light of organised crime, unlike its
application today to less heinous crimes such as theft. It is
submitted that there was no intention or purpose to cover offences
under the PMLA so widely. It is also submitted that there are certain
offences which are less severe and heinous than money-laundering
itself and that the inclusion of such offences in the Schedule does
not have a rational nexus with the objects and reasons of the PMLA
and the same is unreasonable, arbitrary and violative of Articles 14
and 21 of the Constitution of India.
(ix) It has been submitted that the PMLA cannot be a standalone
statute. To bolster this claim, reliance has been placed on speeches
made by Ministers in the Parliament. Further reliance has been
placed on K.P. Varghese vs. Income Tax Officer, Ernakulum &
Anr.19
, Union of India & Anr. vs. Martin Lottery Agencies
18 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances, 1988 (for short, “Vienna Convention”); Basle Statement of Principles, 1989; Forty
Recommendations of the Financial Action Task Force on Money Laundering, 1990; Political
Declaration and Global Program of Action adopted by the United Nations General Assembly on
23.02.1990; and Resolution passed at the UN Special Session on countering World Drug
Problem Together – 8th to 10th June 1998.
19 (1981) 4 SCC 173 (Para 8)

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Limited20
and P. Chidambaram vs. Directorate of
Enforcement21
.
(x) Our attention is also drawn to the provisions which have now
been replaced in the statute. Prior to 2013 amendment, Section 8(5)
of the PMLA was to the following effect: -
“8. Adjudication—
….
(5) Whereon conclusion of a trial for any scheduled
offence, the person concerned is acquitted, the attachment
of the property or retention of the seized property or record
under sub-section (3) and net income, if any, shall cease to
have effect.”
However, vide amendment in 2013, the words ‘trial for any
scheduled offence’ were replaced with the words ‘trial of an offence
under this Act’. It is urged that for the property to qualify as
proceeds of crime, it must be connected in some way with the activity
related to the scheduled offence. Meaning thereby that if there is no
scheduled offence, there can be no property derived directly or
indirectly; thus, an irrefutable conclusion that a scheduled offence
is a pre-requisite for generation of proceeds of crime.
20 (2009) 12 SCC 209 (Para 38)
21 (2019) 9 SCC 24 (Para 25)

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(xi) It is further argued that an Explanation has been added to
Section 44(1)(d) of the PMLA by way of Finance (No. 2) Act, 2019,
which posits that a trial under the PMLA can proceed independent
of the trial of scheduled offence. It is submitted that the Explanation
is being given a mischievous interpretation when it ought to be read
plainly and simply. It is stated that the Explanation relates only to
the Special Court and not the trial of the scheduled offence. It is
submitted that a Special Court can never convict a person under the
PMLA without returning a finding that a scheduled offence has been
committed.
(xii) It is submitted that the application of Cr.P.C. is necessary since
it is a procedure established by law and there cannot be an
investigation outside the purview of Section 154 or 155 of the Cr.P.C.
Reference is made to the constitutional safeguards of reasonability
and fairness. It is submitted that the Act itself, under Section 65,
provides for the applicability of the Cr.P.C.22
It is pointed out that
several safeguards, procedural in nature are being violated. To
illustrate a few - non registration of FIR, lack of a case diary,
22 Ashok Munilal Jain & Anr. vs. Assistant Director, Directorate of Enforcement, (2018) 16 SCC
158 (Paras 3-5)

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restricted access to the ECIR, violation of Section 161 of the Cr.P.C.,
Section 41A of the Cr.P.C., lack of magisterial permission under
Section 155 of the Cr.P.C. Such unguided use of power to investigate
and prosecute any person violates Articles 14 and 21 of the
Constitution.
(xiii) Another argument raised by the learned counsel is that the ED
officers are police officers. It is submitted that the determination of
the same depends on: (1) what is the object and purpose of the
special statute and (2) the nature of power exercised by such
officers? The first argument in this regard is that if it can be shown
that in order to achieve the objectives of the special statute -
preventive and detection steps to curb crime are permitted and
coercive powers are vested, then such an officer is a police officer.
Further, such an officer is covered within the ambit of Sections 25
and 26 of the Indian Evidence Act, 187223. In support of the test to
gauge the objective of the statute, reference has been made to State
of Punjab vs. Barkat Ram24
, wherein it was held —a customs
23 For short, “the 1872 Act” or “the Evidence Act”
24 (1962) 3 SCR 338; Also see: Tofan Singh vs. State of Tamil Nadu, 2020 SCC OnLine SC 882
(Para 88)

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officer is not a police officer within the meaning of Section 25 of the
1872 Act. It is also stated that police officers had to be construed
not in a narrow way but in a wide and popular sense. Reference is
made to Sections 17 and 18 of the Police Act, 186125, whereunder
an appointment of special police officers can be made. Thus, it is
stated that it is not necessary to be enrolled under the 1861 Act, but
if one is invested with the same powers i.e., the powers for prevention
and detection of crime, one will be a police officer. Then, the PMLA
is distinguished from the 1962 Act, Sea Customs Act, 187826,
Central Excise Act, 194427 and the CGST Act. The dissenting
opinion of Subba Rao, J. in Barkat Ram28 is also relied upon.
Thereafter, it is stated that PMLA, being a purely penal statute, one
needs to look at the Statement of Objects and Reasons of the 1999
Bill and the Financial Action Task Force29 recommendations.
25 For short, “1861 Act”
26 For short, “1878 Act” or “the Sea Customs Act”
27 For short, “1944 Act” or “the Central Excise Act”
28 Supra at Footnote No.24
29 For short, “FATF” – an inter-governmental body, which is the global money laundering and
terrorist financing watchdog.

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(xiv) Reliance was also placed on Raja Ram Jaiswal vs. State of
Bihar30
. Further, it has been stated that even in Tofan Singh vs.
State of Tamil Nadu31, the case of Raja Ram Jaiswal32 has been
relied upon and it is concluded that when a person is vested with
the powers of investigation, he is said to be a police officer, as he
prevents and detects crime. Further, the powers under Section 50
of the PMLA for the purpose of investigation are in consonance with
what has been held in Tofan Singh33 and establishes a direct
relationship with the prohibition under Section 25 of the 1872 Act.
Another crucial point raised is that most statutes where officers have
not passed the muster of ‘police officers’ in the eyes of law, contain
the term “enquiry” in contrast with the term “investigation” used in
Section 50 of the PMLA. A parallel has also been drawn between the
definition of “investigation” under the PMLA in Section 2(1)(na) and
Section 2(h) of the Cr.P.C. Further, it is urged that the test of power
to file ‘chargesheet’ is not determinative of being a police officer.
30 AIR 1964 SC 828
31 2020 SCC OnLine SC 882 (Para 88) (also at Footnote No.24)
33 Supra at Footnote No.31 (also at Footnote No.24)

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(xv) It is then urged that Section 44(1)(b) of the PMLA stipulates
that cognizance can be taken only on a complaint being made by the
Authority under the PMLA. Whereas, in originally enacted Section
44(1)(b), both the conditions i.e., ‘filing of a police report’, as well as,
‘a complaint made by an authority’ were covered. Learned counsel
also reminisces of the speech of the then Finance Minister on the
Prevention of Money-Laundering (Amendment) Bill, 200534 in the
Lok Sabha on 06.05.2005. However, it was also conceded that the
amendment of Section 44(1)(b) of the PMLA removed the words,
“upon perusal of police report of the facts which constitute an
offence under this Act or”. Next amendment made was insertion of
Section 45(1A) and Section 73(2)(ua), by which the right of police
officers to investigate the offence under Section 3 was restricted
unless authorised by the Central Government by way of a general or
special authorisation. Further amendment was deletion of Section
45(1)(a) of the PMLA, making the offence of money-laundering under
the PMLA a non-cognizable offence. Further, it is submitted that
amendment to Section 44(1)(b) has been made as a consequence for
34 For short, “2005 Amendment Bill”

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making the offence under the PMLA non-cognizable. It is stated that
even today if investigation is done by a police officer or another, he
can only file a complaint and not a police report. Therefore, the
above-mentioned test is irrelevant and inapplicable. Absurdity that
arises is due to two investigations being conducted, one by a police
officer and the other by the authorities specified under Section 48.
An additional point has been raised that the difference between a
complaint under the PMLA and a chargesheet under the Cr.P.C. is
only a nomenclature norm and they are essentially the same thing.
Thus, basing the determination of whether one is a police officer or
not, on the nomenclature, is not proper.
(xvi) In respect of interpretation and constitutionality of Section
50 of the PMLA, our attention is drawn to Section 50(2) which
pertains to recording of statement of a person summoned during the
course of an investigation. In that, Section 50(3) posits that such
person needs to state the truth. Further, he has to sign such
statement and suffer the consequences for incorrect version under
Section 63(2)(b); and the threat of penalty under Section 63(2) or
arrest under Section 19.

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(xvii) It is urged that in comparison to the constitutional law, the
Cr.P.C. and the 1872 Act, the provisions under the PMLA are
draconian and, thus, violative of Articles 20(3) and 21 of the
Constitution. Our attention is drawn to Section 160 of the Cr.P.C.
when person is summoned as a witness or under Section 41A as an
accused or a suspect. In either case, the statement is recorded as
per Section 161 of the Cr.P.C. Safeguards have been inserted by
this Court in Nandini Satpathy vs. P.L. Dani & Anr.35, while also
the protection under Section 161(2) is relied on. Thus, based on
Sections 161 and 162, it is submitted that such evidence is
inadmissible in the trial of an offence, unless it is used only for the
purpose of contradiction as stipulated in Section 145 of the 1872
Act. Further, it is stated that proof of contradiction is materially
different from and does not amount to the proof of the matter
asserted36 and can only be used to cast doubt or discredit the
testimony of the witness who is testifying before Court37. The
legislative intent behind Section 162 of the Cr.P.C. is also relied
35 (1978) 2 SCC 424
36 Tahsildar Singh & Anr. vs. State of U.P., AIR 1959 SC 1012 (paras 16-17, 42); Also see: V.K.
Mishra & Anr. vs. State of Uttarakhand & Anr., (2015) 9 SCC 588 (paras 15-20)
37 Somasundaram alias Somu vs. State represented by the Deputy Commissioner of Police, (2020)
7 SCC 722 (para 24)

40
upon, as has been held in Tahsildar Singh & Anr. vs. State of
U.P.38.
(xviii) It is, therefore, urged that the current practice of the ED is
such that it violates all these statutory and constitutional
protections by implicating an accused by procuring signed
statements under threat of legal penalty. The protection under
Section 25 of the 1872 Act is also pressed into service.
(xix) To make good the point, learned counsel proceeded to delineate
the legislative history of Section 25 of the 1872 Act. He referred to
the first report of the Law Commission of India and the Cr.P.C.,
which was based on gross abuse of power by police officers for
extracting confessions.39 Further, this protection was transplanted
into the 1872 Act40, where on the presumption that a confession
made to a police officer was obtained through force or coercion was
fortified41. It was pointed out that recommendations of three Law
Commissions – 14th, 48th and 69th which advocated for allowance of
38 AIR 1959 SC 1012 (also at Footnote No.36)
39 185th Law Commission Report on the Indian Evidence Act, 1872 (2003)
40 See also: Barkat Ram (supra at Footnote No.24)
41 Balkishan A. Devidayal vs. State of Maharashtra, (1980) 4 SCC 600 (para 14)

41
such confessions to be admissible, were vehemently rejected in the
185th Law Commission Report. Thus, relying on Raja Ram
Jaiswal42 where a substantial link between Section 25 of the 1872
Act, police officer and confession has been settled. Therefore, the
present situation where prosecution can be mounted under Section
63 for failing to give such confessions is said to be contrary to
procedure established by law interlinked with the right to a fair trial
under Article 21. Reliance has also been placed on Selvi & Ors. vs.
State of Karnataka43, the 180th Law Commission Report and
Section 313 of the Cr.P.C. as being subsidiaries of right against self-
incrimination and right to silence, not being read against him.
(xx) Learned counsel then delineated on the preconditions for
protection of Article 20(3). First, the person standing in the
character of an accused, as laid down in State of Bombay vs. Kathi
Kalu Oghad44, has been referred to. In this regard, it is submitted
that the term may be given a wide connotation and an inclusion in
the FIR, ECIR, chargesheet or complaint is not necessary and can
43 (2010) 7 SCC 263 (paras 87-89)
44 AIR 1961 SC 1808

42
be availed even by suspects at the time of interrogation. It is urged
that both the position of law stands clarified in Nandini Satpathy45
and Selvi46 — even to the extent where answering certain questions
can incriminate a person in other offences or where links are
furnished in chain of evidence required for prosecution. It is then
urged that the expression ‘shall be compelled’ is not restricted to
physical state, but also mental state of mind and it is argued that
nevertheless a broad interpretation must be given to the
circumstances in which a person can be so compelled for recording
of statement. Additionally, the term ‘to be a witness’ would take
within its fold ‘to appear as a witness’ and it is said that it must
encompass protection even outside Court in investigations
conducted by authorities such as the ED47. It was also argued that
this protection should extend beyond statements that are
confession, such as incriminating statements which would furnish
a link in the chain of evidence against the person.
47 M.P. Sharma & Ors. vs. Satish Chandra, District Magistrate, Delhi & Ors., (1954) SCR 1077
(para 10).

43
(xxi) It is submitted that the test which this Court ought to
consider for determination of the vires of Section 50 of the PMLA is:
whether a police officer is in a position to compel a person to render
a confession giving incriminating statement against himself under
threat of legal sanction and arrest? It is further pointed out that
the ED as a matter of course records statement even when the
accused person is in custody. In some circumstances, a person is
not even informed of the capacity in which he/she is being
summoned. What makes it worse is the fact that the ED claims the
non-application of Chapter XII of the Cr.P.C. It does not register FIR
and keeps the ECIR as an internal document. All the above-
mentioned circumstances are said to render the questioning by the
ED, which might not be restricted to the offence of money-laundering
alone, as a testimonial compulsion48
. Hence, advocating the
protection of Article 20(3) of the Constitution, it is submitted that all
safeguards and protections are rendered illusionary.
(xxii) Finally, an argument is raised that Section 50 of the PMLA is
much worse than Section 67 of the Narcotic Drugs and Psychotropic
48 Even the applicability of Prevention of Money-Laundering (Forms, Search and Seizure or
Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority,
Impounding and Custody of Records and the Period of Retention) Rules, 2005.

44
Substance Act, 198549. Further, the NDPS Act is the underlying
reason for the PMLA and this Court in Tofan Singh50, in no
uncertain terms, has given protection in respect of confessional
statement even in the NDPS Act. The much harder and harsher
punishment of death in the NDPS Act is also contrasted against the
PMLA. It is also submitted that constitutional safeguards cannot be
undermined by the usage of the term ‘judicial proceedings’. The
term has been defined in Section 2(i) of the Cr.P.C. which includes
any proceeding in the course of which evidence is or may be legally
‘taken on oath’51. Section 50(1) has been distinguished for being in
respect of only Section 13 of the PMLA. It is also submitted that the
enforcement authority is not deemed to be a civil Court; it can be
easily concluded that an investigation done by the enforcement
authority is not a judicial proceeding and Section 50 of the PMLA
falls foul of the constitutional safeguards.
(xxiii) Pertinently, arguments have also been advanced in
respect of the implication of laws relating to money bills and their
49 For short, “NDPS Act”
51 Assistant Collector of Central Excise, Guntur vs. Ramdev Tobacco Company, (1991) 2 SCC 119
(para 6)

45
application to the Amendment Acts to the PMLA. However, at the
outset, we had mentioned that this issue is not a part of the ongoing
discourse in this matter and we refrain from referring to the
arguments raised in that regard.
3. Next submissions were advanced by Mr. Sidharth Luthra,
learned senior counsel on the same lines. He argued that the
current procedure envisaged under the PMLA is violative of Article
21 of the Constitution of India. The procedure established by law
has to be in the form of a statute or delegated legislation and pass
the muster of the constitutional protections.52
The Cr.P.C. has
several safeguards in respect of arrested investigation; they are also
rooted in the Cr.P.C. of 1898. They are reflective of the constitutional
protections. The manual, circulars, guidelines of the ED are
executive in nature and as such, cannot be used for the curtailment
of an individual liberty. Under the PMLA, there is no visible sign of
these protections against police's power of search and arrest; it is in
stark contrast with the constitutional protections given also the
52 Gudikanti Narasimhulu & Ors. vs. Public Prosecutor, High Court of Andhra Pradesh, (1978) 1
SCC 240 (paras 1, 2, 10)

46
reverse presumption against innocence at stage of bail under Section
45 of the PMLA. Further, the destruction of the presumption of
innocence under Sections 22, 23 and 45 cannot even meet the test
at the pre-complaint and pre-cognizance stage53
and the accused
cannot escape the rigors of custody as per Section 167 of the Cr.P.C.
As such, these conditions of reverse burden are in violation of
Articles 14 and 21 of the Constitution. Presumption of innocence
even in the pre-constitutional era has been a part of the right to a
fair trial.54 After the Constitution came into existence, it has formed
a part of a human right and procedure established by law.55 Lack of
oversight in an investigation under the PMLA is said to be in gross
violation of justice, fairness and reasonableness. It is also pointed
out that while the predicate offence might be investigated, protected
under the garb of the Cr.P.C., the non-application of such
safeguards under the PMLA is wholly unjustified.56
The procedure
as envisaged under the PMLA, especially under Section 17, vests the
53 Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra & Anr., (2005) 5 SCC 294 (paras
10, 11 and 21).
54 Attygalle & Anr. vs. The King, AIR 1936 PC 169
55 Noor Aga vs. State of Punjab & Anr., (2008) 16 SCC 417
56 State of West Bengal & Ors. vs. Committee for Protection of Democratic Rights, West Bengal &
Ors., (2010) 3 SCC 571 (Para 68)

47
executive with the supervisory power in an investigation. The same
is anathema to the rule of law and the magisterial supervision of an
investigation is an integral part and is a necessity for ensuring free
and fair investigation.57
(i) It is further submitted that not supplying of the ECIR to the
accused is in gross violation of Article 21 of the Constitution, the
ECIR being equivalent to an FIR instituted by the ED. It contains
the grounds of arrest, details of the offences; and as such, without
the knowledge of the ingredients of such a document the ability of
the accused to defend himself at the stage of bail cannot be fully
realized. It may also hamper the ability to prepare for the trial at a
later stage58
. Further, it is submitted that even under the 1962 Act
and the Foreign Exchange Regulation Act, 197359, Section 167 of
the Cr.P.C. has been held to be applicable and also found to be a
human right60
. Further, it is argued that there is no rational basis
for a search or a seizure to be reported to the Adjudicating Authority,
57 Sakiri Vasu vs. State of Uttar Pradesh & Ors., (2008) 2 SCC 409 (paras 15-17)
58 Youth Bar Association of India (supra at Footnote No.11); Also see: D.K. Basu vs. State of W.B.,
(1997) 1 SCC 416
59 For short, “FERA”
60 Directorate of Enforcement vs. Deepak Mahajan & Anr., (1994) 3 SCC 440

48
as they have no control. Further, the PMLA has two sets of processes
for attachment and confiscation which is subject to final
determination. Hence, lack of judicial oversight is irrational, as
attachment is a step-in aid for final adjudication. In absence of
safeguards and supply of ECIR, a fair investigation is not a statutory
obligation. This is contrary to the Constitution and the Cr.P.C.
Further, it is submitted that personal liberty under Article 21 cannot
be curtailed as the ED manuals, circulars and guidelines are
administrative directions and cannot be regarded as law under
Article 13 of the Constitution. Such restrictions on personal liberty
based on administrative directions are neither reasonable
restrictions nor law under Articles 13 and 19(2) of the Constitution.
Reliance has been placed on a plethora of cases, such as Bidi
Supply Co. vs. Union of India & Ors.61
, Collector of Malabar &
Anr. vs. Erimmal Ebrahim Hajee62
, G.J. Fernandes vs. The State
of Mysore & Ors.63 and Bijoe Emmanuel & Ors. vs. State of
61 AIR 1956 SC 479 (para 9)
62 AIR 1957 SC 688 (paras 8,9)
63 AIR 1967 SC 1753 (para 12)

49
Kerala & Ors.64
to show that the inapplicability of Chapter XII of
the Cr.P.C. cannot be countenanced.
(ii) It is also argued that the PMLA has inadequate safeguards for
guaranteeing a fair investigation. For, there are no safeguards akin
to Sections 41 to 41D, 46, 49, 50, 51, 55, 55A, 58, 60A of the Cr.P.C.
Under Chapters V and VII of the PMLA, safeguards are limited to
Sections 16 to 19 and 50. The onerous bail conditions under Section
45 are in the nature of jurisdiction of suspicion that is preventive
detention under Article 22(3) to 22(7), which in itself has various
safeguards which are absent in the PMLA. Further, post 2019
amendment, making money-laundering a cognizable and non-
bailable offence, there are no more checks and balances present
against the exercise of discretion by the ED. Magisterial oversight
has been revoked; also, supervision envisaged under Section 17 is
that of the executive which is against the rule of law and right of fair
trial65. It is also stated that under the current scheme, an accused
will be subject to two different procedures which is under the
predicate offence and under the PMLA. To illustrate, Sections 410
64 (1986) 3 SCC 615 (paras 9, 10, 13-19)
65 Sakiri Vasu (supra at Footnote No.57) (paras 15-17)

50
and 411 of the IPC are scheduled offences overlapping with Sections
3 and 4 of the PMLA. However, the safeguards provided are nowhere
uniform. The same is unreasonable and manifestly arbitrary66
. It is
also to be noted that the PMLA does not expressly exclude the
application of Chapter XII of the Cr.P.C. and as such, ambiguity
must be interpreted in a way that protects fundamental rights of the
people67
.
(iii) The next leg of the argument is to the effect that subsequent
amendment cannot revive Section 45, which was struck down as
unconstitutional by the decision in Nikesh Tarachand Shah68. The
same could have not been revived by the 2018 and 2019
amendments. A provision or a statute held to be unconstitutional
must be considered stillborn and void, and it cannot be brought back
to life by a subsequent amendment that seeks to remove the
constitutional objection. It must be imperatively re-enacted69
.
Further, even in arguendo, the twin conditions are manifestly
66 Subramanian Swamy vs. Director, Central Bureau of Investigation & Anr., (2014) 8 SCC 682
(paras 49, 70).
67 Tofan Singh (supra at Footnote Nos. 24 and 31) (para 4.10)
69 Saghir Ahmad vs. State of U.P. & Ors., AIR 1954 SC 728 (para 23); Also see: Deep Chand vs.
The State of Uttar Pradesh & Ors., (1959) Supp. 2 SCR 8 (para 21)

51
arbitrary as it is against the basic criminal law jurisprudence of the
right of presumption of innocence. This right has been recognized
under International Covenant on Civil and Political Rights70
, as well
as, by this Court in Babu vs. State of Kerala71. It is also contended
that subjecting an accused person not arrested during investigation
to onerous bail conditions under Section 45 is contrary to the
decision of this Court72
. It was urged that even other statutes have
such twin conditions for bail such as Terrorist and Disruptive
Activities (Prevention) Act, 198773
, the Maharashtra Control of
Organised Crime Act, 199974
and the NDPS Act. However, it is
pointed out that it has been held that such onerous conditions were
necessary only in certain kinds of cases - for example, terrorist
offences, which are clearly a distinct and incompatible offence in the
face of PMLA. Further, it is argued that even under the Unlawful
Activities (Prevention) Act, 196775
, the Court has to examine only
70 For short, “ICCPR”
71(2010) 9 SCC 189 (paras 27 and 28)
72 Satender Kumar Antil vs. Central Bureau of Investigation & Anr., (2021) 10 SCC 773 and
clarificatory order dated 16.12.2021 in MA No. 1849/2021
73 For short, “TADA Act”
74 For short, “MCOCA”
75 For short, “UAPA”

52
whether the allegation is prima facie true while granting bail, but in
case of PMLA, the Court has to reach a finding that there are
reasonable grounds for believing that the accused is not guilty before
granting bail. Thus, as soon as charges are framed, a person is
disentitled to apply for bail as prima facie case is made out, which
helps in achieving the purpose of preventive detention without
procedure established by law76
. Further, these deep restrictive
conditions even under the UAPA and the NDPS Act are restricted
only to parts of these Acts and not to the whole of them. However,
the same is not the case under the PMLA, as it is applicable to all
predicate offences. Such an approach ignores crucial distinctions
such as nature, gravity and punishment of different offences in the
Schedule of PMLA and treats unequals as equals. This is in violation
of Article 14 of the Constitution of India. Reliance is also placed on
United States vs. Anthony Salerno77, where restrictive bail
provisions are permitted in pre-trial detention because of the
presence of detailed procedural safeguards. Still, it is argued, that
such restrictive bail provisions cannot oust the ability of
76 Ayya alias Ayub vs. State of U.P. & Anr., (1989) 1 SCC 374 (paras 11-17)
77 107 S.Ct. 2095 (1987)

53
Constitutional Court to grant bail on the ground of violation of Part
III of the Constitution78
. Further, it has been held that Magistrate
must ensure that frivolous prosecution is weeded out. Provisions
such as Sections 21, 22, 23 and 45 of the PMLA reverse the burden
and curtail the jurisdiction of the trial Court arbitrarily in violation
of the findings of this Court79
. Thus, various counts that have been
argued herein point out that the PMLA suffers from manifest
arbitrariness in light of Shayara Bano vs. Union of India & Ors.80
and Joseph Shine vs. Union of India81
.
4. Next in line for submissions on behalf of private parties is
Dr. Abhishek Manu Singhvi, learned senior counsel. He firstly
argued the point of burden of proof under Section 24 of the PMLA.
He has pointed out that prior to amendment, the entire burden of
proof right from investigation till the judgment was on the accused.
Even though this has changed post 2013 amendment and some
balance has been restored, it has not fully cured this section of its
78 Union of India vs. K.A. Najeeb, (2021) 3 SCC 713 : 2021 SCC Online SC 50 (para 18)
79 Krishna Lal Chawla & Ors. vs. State of Uttar Pradesh & Anr., (2021) 5 SCC 435
80 (2017) 9 SCC 1 (paras 87, 101)
81 (2019) 3 SCC 39 (paras 61, 103, 105)

54
unconstitutional nature. He has gone into the legislative history of
the Act and stated that originally the presumption was raised even
prior to the trial and state of charge, this was diluted by the
amendment of 2013 thereafter the presumption would only apply
after the framing of charges.
(i) Learned senior counsel submits that the wording of Section 24
refers to formal framing of charges under Section 211 of the Cr.P.C.
For this submission, he relies on the speech of the Minister
introducing the amendment in the Parliament. It has been stated
that presumption is raised in relation to the fact of money-
laundering. Such a presumption cannot be raised in relation to an
essential ingredient of an offence. The commission of an offence, as
such, cannot be presumed. In reference to Section 4 of the 1872
Act, distinction between sub-sections (a) and (b) of Section 24 is
highlighted, wherein the former states - ‘shall presume’ and the
latter states - ‘may presume’.
(ii) It is urged that post amendment also there is no requirement
for the prosecution to prove any facts once the charges are framed.
The entire burden of disproving the case, as set out in the complaint,
inverts onto the accused. It is, hence, contrary to the requirement

55
of proof of foundational facts, as is seen in other legislations. Such
an inversion is not present in any other statute. It is stated that
even in the NDPS Act, where no requirement of foundational facts
was provided, this Court has read such necessity into the Act. As
for sub-section (b), it is pointed out that the ‘may presume’ provision
eliminates the safeguards of sub-section (a) and provides no
guidance as to when a presumption is to be invoked. The learned
counsel also points the discrepancy that the word ‘authority’
appearing in Section 24, which also appears in Section 48, is
distinctive in nature and that Section 24 absurdly allows an
investigator to presume the commission of an offence. This is clearly
arbitrary and de hors logic. In light of the same, the constitutional
vires of the section are challenged or a reading down to fulfil the
constitutional mandate is pressed for.
(iii) The next point of attack for Dr. Singhvi, learned senior counsel
is the constitutionality of Sections 17 and 18. The absence of
safeguards in lieu of searches and seizures is canvassed. It has been
pointed out that such searches or seizures can take place even
without an FIR having been registered or a complaint being filed
before a competent Court. Foremost, the legislative history of these

56
two Sections is pointed out. It is shown that originally the search
and seizure was to be conducted after the filing of a chargesheet or
complaint in the predicate offence. Thereafter, the protection was
diluted by the 2009 amendment, wherein it was provided that the
search and seizure operations would take place only after forwarding
a report to the Magistrate under Section 157 of the Cr.P.C. It was
only in 2019 that these final safeguards were also completely
removed by the Finance (No. 2) Act, 2019. The effect, it is argued, is
such that the ED has unfettered powers to commit searches and
seizures without any investigation having been done in the predicate
offence, and sometimes even without an FIR being registered. There
are no prerequisites or safeguards as the ED can now simply walk
into a premises. Even for non-cognizable offences, the ED need not
wait for the filing of a complaint before a Court. In this way, in the
absence of any credible information to investigate, the ED cannot be
allowed to use such uncanalized power. The magisterial oversight
cannot be replaced by the limited oversight of the Adjudicating
Authority, as they have no real control over the ED, especially in
case of criminal investigations. Thus, it is submitted that such lack

57
of effective checks and balances is unreasonable and violative of
Articles 14 and 21 of the Constitution.
(iv) Our attention is also drawn to the Prevention of Money-
Laundering (Forms, Search and Seizure or Freezing and the Manner
of Forwarding the Reasons and Material to the Adjudicating
Authority, Impounding and Custody of Records and the Period of
Retention) Rules, 200582, and it is prayed that this Court must
clarify that these rules are not ultra vires Sections 17 and 18 of the
PMLA. Pertinently, they relate to the provisions of Cr.P.C. being
applicable to searches under the Act.
(v) Next leg of submissions challenges the vires of the second
proviso of Section 5(1), as it allows for attachment independent of
the existence of a predicate offence, given that such property might
not even be proceeds of crime. Though an emergency procedure, no
threshold had to be met and the first proviso has no application. It
is also submitted that the proviso cannot travel beyond the scope of
the main provision. Our attention is drawn to the legislative history;
it is stated that the PMLA did not originally contain the second
82 For short, “Seizure Rules, 2005”

58
proviso. Attachment was only to be done after filing of chargesheet
in the predicate offence. For the first time, in 2009, this proviso was
added, to avoid frustration of the proceedings. It is submitted that
this proviso has no anchor to either the scheduled offence or the
proceeds of crime. It is at the mere satisfaction of the officer. In this
way, it is submitted, attachment of property of any person can be
made, with no fetters. Our attention is also drawn to the use of word
‘any’ for person and property and its distinction from the term
‘proceeds of crime’, having a direct nexus with the ambit of the main
Section. It is argued that it is not to be mixed with any offence but
only scheduled offences. The ED is alleged to employ this language
in attaching property purchased much before the commission of
scheduled offences, to the extent not having any nexus. It is
submitted that there has to be a link between the second proviso to
the proceeds of crime and scheduled offence being investigated
under a specific ECIR before the ED.83
(vi) Submissions with respect to Section 8 of the PMLA maintain
that Section 8(4) allows the ED to take possession of the attached
83 Dwarka Prasad vs. Dwarka Das Saraf, (1976) 1 SCC 128, Also see: Satnam Singh & Ors. vs.
Punjab & Haryana High Court and Ors., (1997) 3 SCC 353

59
property at the stage of confirmation of provisional attachment made
by the Adjudicating Authority. It is submitted that this deprivation
of a person’s right to property at such an early stage without the due
process of law, is unconstitutional. Further the period of attachment
under Section 8(3)(a) of the PMLA is also arbitrary and
unreasonable. To make good the point, the relevant legislative
history is pointed out. The original enactment where provisional
attachment would continue during the pendency of proceedings
related to ‘any scheduled offence’. Thereafter in 2012, the same was
changed to ‘any offence under the PMLA’, followed by 2018
amendment – ‘a period of ninety days during investigation of the
offence or during pendency of proceedings under the PMLA’, and
finally by 2019 amendment the increase from ‘ninety days’ to ‘three
hundred and sixty-five days’. We are also taken through the
elaborate process of attachment of property. Thereby, it is
highlighted that the ED can take possession of property after a single
adjudicatory process, wherein there is no oversight over the ED. It
is stated that such alienation of property without any proceedings
having been brought before the Court is undoubtedly an
unconstitutional act. As for Section 8(3)(a) clarification is sought in

60
light of the confusion that it allows for a continuation of the
confirmed provisional attachment for three hundred and sixty-five
days or during the pendency of proceedings under the PMLA. This
might lead to a reading where the ED has a period of three hundred
and sixty-five days to file its complaint.
(vii) Learned counsel then referred to the Prevention of Money-
Laundering (Taking Possession of Attached or Frozen Properties
Confirmed by the Adjudicating Authority) Rules, 201384 wherein
specific challenge is raised against Rules 4(4), 5(3), 5(4) and 5(6).
The main ground of challenge is disproportionality, similar to the
attachment issue, transfer of attached shares and mutual funds,
depressing of value of property, eviction of owners of a movable
property, possession of productive assets along with gross income,
all monetary benefit is stated to be arbitrary, reasonable, absurd and
disproportionate. Herein, it is highlighted that various anomalies
may crop up, such as taking of the shares and the ED becoming the
majority shareholder in corporations, attachment of properties
worth far more than the value of proceeds of crime. Under Section
84 For short, “Taking Possession Rules, 2013”

61
2(1)(zb), the expression “value” is defined as fair market value on the
date of acquisition and not fair market value on date of attachment.
Arguably, property bought years ago is thereby undervalued by the
ED. Attachment of immovable property and eviction in case of
unregistered leases is also challenged. To challenge this
disproportionate imposition and restrictions, reliance is placed on
Shayara Bano85
and Anuradha Bhasin vs. Union of India &
Ors.86
.
(viii) It is then urged by the learned counsel that Section 45(1) of the
PMLA, reverses the presumption of innocence at the stage of bail as
an accused. According to him, the accused at this stage can never
show that he is not guilty. It is also maintained that these are
disproportionate and excessive conditions for a bail. Reference is
also made to Nikesh Tarachand Shah87 to the limited extent that
the 2018 amendment has not removed invalidity, pointed out in the
aforesaid judgment of this Court. It is also stated that regardless of
the amendment, the twin condition is in violation of Article 21 of the
85 Supra at Footnote No.80 (paras 101-102)
86 2020 (3) SCC 637

62
Constitution by virtue of the nature of the offence under PMLA. It is
stated that presumption of innocence is a cardinal principle of
Indian criminal jurisprudence.88
Reference is also made to Kiran
Prakash Kulkarni vs. The Enforcement Directorate and Anr.89
Arguments have also been raised against an amendment through a
Money Bill being violative of Article 110 of the Constitution. The
need for interpretation by Rojer Mathew vs. South Indian Bank
Limited and Ors.90
has also been asserted. The 2018 amendment
is also challenged by referring to the notes on Clauses of the Finance
Bill, 2018. It is also pointed out that similar amendments were
proposed for the 1962 Act in the year 2012 and, yet, the same were
dropped at the insistence of members of the Parliament91
.
(ix) Further, given the maximum punishment of seven (7) years
under PMLA, it was argued that it is disproportionate when
comparing the same to other offences under the IPC which are far
more serious in nature and are punishable with death. In light of
the same, it is highly questionable as to how such an onerous
88 Arnab Manoranjan Goswami vs. State of Maharashtra & Ors., (2021) 2 SCC 427 (para 70)
89 Order dated 11.4.2019 in S.L.P. (Criminal) No.1698 of 2019
90 (2020) 6 SCC 1
91 Speech of Shri. Arun Jaitley dated 26.3.2012 in the Rajya Sabha

63
condition can be imposed on an accused. It is also pointed out that
several scheduled offences are bailable. Further, the anomaly that
at the time of arrest under Section 19 no documents are provided in
certain cases, has also been highlighted. It was also stated that it is
a near impossibility to get bail as under the UAPA, TADA Act, or the
Prevention of Terrorism Act, 200292.
5. Mr. Mukul Rohatgi, learned senior counsel was next to argue on
behalf of private parties. He urged that the Explanation to Section
44 is contrary to Section 3 read with Section 2(1)(u), hence, the same
is unsustainable and arbitrary in the eyes of law. Special emphasis
was laid on the expression “shall not be dependent upon any order
by the Trial Court in the scheduled offence”. It was argued that both
trials may be tried by the same Court. In such a case, Section 3
offence cannot be given pre-eminence, as that would run contrary to
Section 3 and would be manifestly arbitrary, given the fact that an
acquittal in the scheduled offence cannot lead to one being found
guilty for the derivative offence of money-laundering. A direct link
between the proceeds of crime and Section 3 offence was also
92 For short, “POTA”

64
highlighted. It was submitted that the Special Court cannot
continue with the trial for Section 3 offence once acquittal in the
predicate offence takes place. Section 44 unmistakably provides for
the Special Court trial of money-laundering. It was pointed out that
it is normal that if one is acquitted for the predicate offence, the
money-laundering procedure could still go on. This is contrary to
the definition under Section 3, which states that money-laundering
is inextricably linked to the predicate offence.
(i) It was also pointed out that the usual practice is of filing an
ECIR on the same day or right after the FIR has been filed by
replicating it almost verbatim. Canvassing for proper procedure and
investigation before filing of the ECIR and initiation of the process
under the PMLA, reference was also made to other Acts, such as
Smugglers and Foreign Exchange Manipulators Act, 197693, FERA
or Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 197494 and the 1962 Act, being Acts which would not
subsist alone or by themselves without the predicate offences95
.
93 For short, “SAFEMA”
94 For short, “COFEPOSA”
95 Barendra Kumar Ghosh vs. The King Emperor, 1924 SCC OnLine PC 49 : AIR 1925 PC 1

65
(ii) It was also argued that often the ED widens the investigation
beyond what is contained in the chargesheet. This is contrary to the
intentions of the Act. The true meaning of the definition under
Section 3 of the PMLA was proposed to be divided into three
components of predicate offence, proceeds of crime and
projecting/claiming as untainted. It was conceded that even
abetment would form a part of the offence and as a consequence,
whoever attempts, assists, abets, incites - are all covered by the
same. For predicate offence and Section 3, it was stated that if the
former is gone, the latter cannot subsist.
(iii) Next argument raised pertained to the ambit and meaning of
Section 3. It was submitted that mere possession or concealment of
proceeds of crime will not constitute money-laundering and this was
bolstered by the phrase ‘projecting or claiming as untainted
property’. The “and” was stated to be a watertight compartment.
The Finance Minister’s 2012 Rajya Sabha Speech was also relied
upon to showcase how “and projecting” was an essential element.
6. Mr. Amit Desai, learned senior counsel also advanced
submissions on behalf of private parties. He also took us through

66
the history of money-laundering, starting from the Conventions to
the FATF and UN General Assembly Resolution96
, which led to the
1999 Bill to help combat and prevent money-laundering. He relies
on the Statement of Objects and Reasons of the Act97
, followed by
the initial ambit of Sections 2(1)(p), 2(1)(u) and 3, which were
amended by the 2013 amendment. It is stated that the Act
presupposes the commission of a crime which is the predicate
offence; hence the questions to be answered by this Court are related
to retrospectivity. Firstly - whether authorities can proceed against
an accused when commission of the predicate offence predates the
addition of the said offences to the Schedule of the PMLA? Secondly
- whether the authorities can proceed against the properties
obtained or projected prior to the commission of an offence under
this Act? Thirdly - whether authorities can proceed when the
predicate offence and the projecting predate the commencement of
this Act? Fourthly - whether jurisdiction subsists under the Act
96 Special Session of the United Nations held for 'Countering World Drug Problem Together' held
in June 1998.
97 “objective was to enact a comprehensive legislation inter alia for preventing money laundering
and connected activities confiscation of proceeds of crime, setting up of agencies and
mechanisms for coordinating measures for combating money-laundering, etc”. It was also
indicated that the proposed Act was “an Act to prevent money-laundering and to provide for
confiscation of property derived from, or involved in, money-laundering and for matters
connected therewith or incidental thereto”.

67
when no cognizance has been taken, the accused has been
discharged or acquitted or the offence compounded? Lastly, learned
counsel also challenges the rigors of the twin conditions for being
incongruent with general bail provisions under Sections 437 and
439 of the Cr.P.C. as being ultra vires.
(i) Learned counsel refers to one of the cases in this batch,
wherein the properties sought to be acquired by the ED were
obtained by the petitioner prior to 2009, while the commission of
offence was in 2013 and Section 13 of the PC Act was inserted into
the PMLA Schedule for the first time in 2009. This, it is maintained
cannot fit into the term “proceeds of crime” under Section 2(1)(u),
the same having been done prior to 2009. It has also been submitted
that for the determination of money-laundering under Section 3 or
any other provision of the Act, the relevant time has to be the time
of the commission of the scheduled offence. The rationale being that
only the presence of a scheduled offence can lead to the generation
of proceeds of crime and, hence, in return the offence of money-
laundering can be committed. Thus, in a way it is suggested that
the starting point for a conviction for Section 3 might be the
commission of a scheduled offence. The argument in respect of the

68
protections provided by the Constitution under Article 20(1), as per
which ingredients for an offence must exist on the day the crime is
committed or detected, have also been impressed in opposition of
any retrospective or retroactive application of the Act. To bolster the
arguments, reliance has been placed on the decisions of this Court
in Soni Devrajbhai Babubhai vs. State of Gujarat and Ors.98
,
Mahipal Singh vs. Central Bureau of Investigation & Anr.99
,
Tech Mahindra Limited vs. Joint Director, Directorate of
Enforcement, Hyderabad & Ors.100
, and Gadi Nagavekata
Satyanarayana vs. Deputy Director Directorate of
Enforcement101
and that of Delhi High Court in Arun Kumar
Mishra vs. Directorate of Enforcement102
, M/s. Ajanta
Merchants Pvt. Ltd. vs. Directorate of Enforcement103
and M/s.
Mahanivesh Oils & Foods Pvt. Ltd. vs. Directorate of
Enforcement104
.
98 (1991) 4 SCC 298 (also at Footnote No.131)
99 (2014) 11 SCC 282
100 WP No. 17525/2014 decided on 22.12.2014 by High Court of Andhra Pradesh
101 2017 SCC Online ATPMLA 2
102 2015 SCC OnLine Del 8658
103 2015 SCC OnLine Del 8659. The decision was assailed by ED before this Court in SLP (Crl.)
No. 18478/2015, wherein an order of Status-quo came to be passed.
104 2016 SCC OnLine Del 475. The judgement however was challenged by ED in LPA before the
Division Bench wherein it was held that the same shall not be treated as precedent.

69
(ii) The argument that to qualify for the offence of money-
laundering, the essential ingredient of ‘projection’ or ‘claiming’ it as
‘untainted property’ is imperative, has also been pressed into
service. It is also urged that proceeds of crime can only be generated
from the commission of a predicate offence and the commencement
of investigation arises only if a predicate offence has generated such
proceeds of crime only subsequent to the inclusion of the predicate
offence to the Schedule of the PMLA. Another point that has been
highlighted is that the projecting, if done prior to the date of
inclusion of the offence to the Schedule, the same cannot be
continuing and as such, is stated to be stillborn for the purposes of
the PMLA.
(iii) It is urged that for the purposes of bail, it is settled law
that offences punishable for less than seven years allows a person
to be set free on bail. As such, the liberty as enunciated by Article
21 of the Constitution cannot be defeated by such an Act. Thus,
Section 45(2) of the PMLA is contrary to general principles of bail
and the Constitution of India. It is also pointed out that Section 437
of the Cr.P.C. imposing similar conditions as Section 45(2) restricts
it to offences punishable with either life imprisonment or death.

70
Under no condition can it be said that the bail conditions under the
PMLA, imposing maximum seven years, are reasonable. Without
prejudice to the aforementioned argument, it was stated that Section
45(2) could only be applicable to bail applications before the Special
Court and the special powers under Section 439 Cr.P.C. It was
submitted that in light of the same, special powers be given to the
Special Court under the PMLA, as these provisions, draconian in
nature, were contemplated only in Acts, such as TADA Act, POTA,
MCOCA & NDPS Act, since securing the presence was difficult in all
of the above. Further, unless Section 3 was to be restricted to
organised crime syndicate, which was in fact the real intent, the bail
provisions are liable to be struck down.
7. Mr. S. Niranjan Reddy, learned senior counsel contends that it
is essential to first understand as to whether money-laundering is a
standalone offence or dependent on the scheduled offence? He
points out that the ED has maintained the former stance. It has
been pointed out that this view has been rejected by the High Courts
of Delhi, Allahabad and Telangana. On the contrary, the High
Courts of Madras and Bombay have accepted such a view. It has

71
been added that the ED's contention is based on the Explanation
added to Section 44(1)(d) by the 2019 amendment. Concededly,
though there are certain exemptions in Section 8(7), it is contended,
that the same are only for special circumstances. Learned counsel
then refers to the sequence of conducting the matters and points out
Sections 43(2) and 44(1), whereby the Special Court can try the
scheduled offence, as well as, the money-laundering offence. He
points out that due to different findings of different High Courts,
certain questions have arisen as to the sequence of conducting the
said two cases. The High Courts of Jharkhand and Kerala have
taken a view that both matters can be tried simultaneously; there is
no necessity to hold back the trial of money-laundering until the
scheduled offence has been tried. It has been submitted that the
High Court of Kerala finds that the offence of money-laundering is
dependent on the scheduled offence. The High Court for the State
Telangana, on the other hand, finds money-laundering completely
independent of the scheduled offence. To drive the point home,
attention is drawn towards Section 212 of the IPC, where the High
Courts have taken a view that unless the original offence is proved,
the person harbouring the accused cannot be sentenced. However,

72
it is also pointed out that Section 212 can be tried simultaneously
with the original offence.
(i) Additionally, it has been submitted that Section 2(1)(u) and
Section 3 of the PMLA have been given a very expansive meaning,
whereby people who do not have knowledge or have not participated,
being totally unrelated third parties, are also being roped in to the
investigations. The culpability has to be maintained. Wrong
interpretation is given to proceeds of crime to be any property even
obtained or derived indirectly. Persons who have not committed the
scheduled offence deriving certain indirect benefits, even without
knowledge, based on Section 24 presumption are held to be guilty of
laundering money.
(ii) Further, the question of retrospectivity has also been
addressed, whereby after the 2019 amendment, money-laundering
is now said to be a continuing offence connected with the proceeds
of crime. It is urged that the ED contends that prosecution or
attachment can take place irrespective of whether the alleged offence
was committed even prior to enactment in 2002, irrespective of the
addition of the predicate offence in the PMLA Schedule. It is
submitted that there are various amendments which are substantive

73
in nature, being given retrospective effect, such as
Sections 2(1)(u), 3, 8, 24, 44, etc. It has also been brought to our
notice that prior to the 2013 amendment in the context of Section 8,
the High Court of Andhra Pradesh, the Madras High Court and the
High Court of Gujarat have held that attachment causes civil
consequences of confiscation. Meaning that in case a scheduled
offence is committed prior to the enactment of the PMLA or inclusion
of certain offences in its Schedule, attachment or confiscation can
go on. However, since then, the amendment has brought about a
new legal question. Today, the line between civil and criminal
consequences has changed, since Section 8 now is dependent upon
one being held guilty for money-laundering. Hence, it cannot be
applied retrospectively for predicate offences or scheduled offences
committed prior to the PMLA enactment. Reference has also been
made to the finding of the Hyderabad High Court where Section 8(5)
being quasi criminal, has been found to be prospective.
8. Dr. Menaka Guruswamy, learned senior counsel urged that
substantive due process has replaced procedure established by

74
law105
. Learned counsel has also pointed out aspects of substantive
due process and the procedure of mandatory open Court review. In
the context of right of accused during interrogation, it was submitted
that this Court dealt with ‘due process’ rights in the Mohammed
Ajmal Mohammad Amir Kasab alias Abu Mujahid vs. State of
Maharashtra106, where the use of Miranda rights has been rejected.
Learned counsel has also gone into the facts of the case, where it is
stated that there has been a six year long pre-trial procedure in both
the predicate offence and laundering offence with limited right of
participation and a reverse burden of proof.
(i) It has also been argued that Section 50 infringes upon the right
to liberty of a person summoned under the Act and violates the right
against self-incrimination. The non-compliance with Section 53 is
penalized through Section 63 of the PMLA. The learned counsel has
adopted the arguments made by other learned counsel in reference
to Tofan Singh107. It is argued that the use of the term “any person”
105 Mohd. Arif alias Ashfaq vs. Registrar, Supreme Court of India & Ors., (2014) 9 SCC 737 (para
28); Also see: Sunil Batra vs. Delhi Administration & Ors., (1978) 4 SCC 494; Mithu vs. State of
Punjab, (1983) 2 SCC 277.
106 (2012) 9 SCC 1

75
without exclusion of the accused under Section 50 is in violation of
the due process. No safeguards provided under the Cr.P.C. and the
1872 Act are extended to person proceeded for PMLA offence. It is
stated that the stage at which a person is guaranteed the
constitutional right under Article 20(3), cannot be made malleable
through legislation. It is stated that even though the PMLA is a
complaint-based procedure, by way of Section 50, one cannot ignore
the pre-complaint stage. As such, Section 50 must be rendered
unconstitutional. Further, it is argued that the ED practice is a
perverse incentive structure for constitutional infringement where
an accused is trapped and sweeping interrogations are conducted
aimed at justifying the summons issued. In respect of Section
44(1)(d), it is stated that the right to a fair trial is taken away and
this provision irreversibly prejudices the accused in the trial
adjudicating the predicate offence.108
(ii) Further, the Explanation to Section 44(1)(d) requires the two
trials to be conducted before the Special Court, but as separate
trials, is said to render the requirement of a fair trial impossible. To
108 Nahar Singh Yadav & Anr. vs. Union of India & Ors., (2011) 1 SCC 307

76
bolster this ground, it is said that when a judge receives evidence
under Section 50 of the PMLA in case of money-laundering, he
cannot remain an independent authority when deciding the
predicate offence based on the material placed before him. Thus,
this paradoxical provision forms a complete absurdity for a judge
dealing with two different sets of rights for the same accused
regarding the connected facts. That is for every predicate offence
which would have otherwise been tried by a Magistrate, the
investigation by the ED will tend to influence the mind of the judge109
.
Further, reliance has also been placed on Suo Motu Writ (Crl.) No. 1
of 2017 in Re: To issue certain guidelines regarding inadequacies
and deficiencies in criminal trials110
. The Court has incorporated
the Draft Rules of Criminal Practice, 2021 which have been
circulated for adoption by all High Courts. It is also argued that
Section 44 takes away the right of appeal from the predicate offences
triable by the Magistrate's Court111
.
109 Hanumant Govind Nargundkar & Anr. vs. State of Madhya Pradesh, AIR 1952 SC 343 (para
10)
110 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. State of Andhra
Pradesh & Ors., (supra at Footnote No.12)
111 Himanshu Singh Sabharwal vs. State of Madhya Pradesh & Ors., (2008) 3 SCC 602

77
(iii) It is urged that the PMLA creates an overbroad frame with no
fetters on investigation. The refusal to provide a copy of the ECIR
creating an opacity surrounding the usage of the ED Manual is also
under challenge. Section 4(b)(v) of the Right to Information Act,
2005112
is pressed into service to showcase that every public
authority is obligated to publish within 120 days of enactment of the
Act - the rules, regulations, instructions, manuals and records held
by it or its employees for discharge of its functions. Contrary to the
above-mentioned provisions, the ED Manual is said to be a mystery
for the general public. Reference is also made to the decision of the
Bombay High Court, wherein the Maharashtra Police was asked to
provide a copy of the police manual in response to an RTI
application113
. It is submitted that such non-disclosure of the ED
Manual is unsustainable in law. It makes the securing of pre-trial
rights of an accused difficult. Even the CBI manual which is based
on a statutory provision of the Cr.P.C., has been found by this Court
to be necessary and to be adhered scrupulously by the CBI114
.
112 For short, “RTI Act”
113 State of Maharashtra vs. Chief Information Commissioner & Anr., 2018 SCC OnLine Bom
1199
114 Vineet Narain & Ors. vs. Union of India & Anr., (1998) 1 SCC 226; Also see: Shashikant vs.
Central Bureau of Investigation & Ors., (2007) 1 SCC 630; Central Bureau of Investigation vs.

78
Similarly, other authorities, such as the Central Vigilance
Commission, Income Tax authorities, authorities under the 1962
Act, police authorities, jail authorities, are all governed by manual
published by them. Thus, it is only the ED which follows a distinct
approach of non-disclosure.
(iv) It has also been argued that the Schedule of the PMLA renders
several bailable offences as non-bailable when this Court has
repeatedly held that bail is the rule and jail is the exception115
.
Predicate offences which under their original act such as the Bonded
Labour System (Abolition) Act, 1976116, are bailable but on the
application of the PMLA, become non-bailable. The intention and
provision of the underlying special Act, hence, becomes otiose by the
overbroad provisions of the PMLA. In another breath, it is argued
that the attachment procedure under the PMLA runs contrary to the
provisions contained in the predicate offence. It is also perplexing,
as the underlying statute itself contain the procedure to attach
Ashok Kumar Aggarwal, (2014) 14 SCC 295; and State of Jharkhand through SP, Central Bureau
of Investigation vs. Lalu Prasad Yadav alias Lalu Prasad, (2017) 8 SCC 1.
115 State of Rajasthan, Jaipur vs. Balchand alia Baliay, (1977) 4 SCC 308; Also see: Sanjay
Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40; State of Kerela vs. Raneef, (2011)
1 SCC 784 (para 15).
116 For short, “1976 Act”

79
illegal proceeds of crime. Aid of the UAPA and Securities and
Exchange Board of India Act, 1992117 is taken to buttress that while
under the predicate offence, attachment can take place only after
the conviction, Section 5 of the PMLA enables attachment of property
prior to conviction. This creates two different standards and two
different criminal attachment proceedings for essentially the same
offence. Even the Cr.P.C. provides for depriving criminals of the fruit
of the crimes and allows for the true owner of the property to be
restored with the position thereof by way of Section 452(5).
(v) The next point argued is in respect of the adjudicatory paralysis
in the Appellate Tribunal. It is submitted that it is one of the only
safeguards in this draconian law to provide an oversight to prevent
abuse of mechanism of attachment. Even this oversight has been
rendered redundant since there has been no appointment of a
chairperson or members of the said Tribunal since 21.09.2019.
Thus, making the Tribunal redundant. Further, it is stated that
taking the possession at the stage when only a provisional
attachment has been made, can cause great hardship and financial
117 For short, “SEBI Act”

80
ruin, amounting to virtually declaring a person guilty and is
avoidable. Further, certain official data has been brought to our
attention to demonstrate the ineffectiveness of the unconstitutional
legislations, where raids have increased each financial year and, yet,
since 2005 the number of convictions till 2015-16 has remained zero
and, thereafter, reached a maximum of four in 2018-19.
9. Then, Mr. Aabad Ponda, learned senior counsel contended that
without prejudice to all the submissions, Section 50(3) and Section
63(2)(a) and (c) of the PMLA, insofar as they relate to the accused
persons, are ultra vires being violative of Articles 20(3) and 21 of the
Constitution of India. He submitted that under the current scheme
of the Act, a scheduled offence requires a prior FIR. A person so
named in the FIR would stand in the character of an accused person,
and as such, he cannot be compelled to incriminate himself or
produce documents incriminating himself under Section 50(3) of the
PMLA. The next leg of the argument is to the extent that Section
63(2)(c), which mandatorily penalises person for disobedience of
Section 50, cannot be applicable to an accused person given the
constitutional protections of Articles 20(3) and 21, whereby he has

81
the right to exercise his fundamental right to silence. We are also
shown the analogous provisions similar to Section 50(3) and 50(4) of
the PMLA in other statutes, such as Section 171A of the 1878 Act,
inserted by Section 12 of the Sea Customs (Amendment) Act, 1955;
Section 108 of the 1962 Act; Section 14 of the Central Excises and
Salt Act, 1944118
and Section 40 of the FERA. Learned counsel
further argued and distinguished custom officers and other above
referred officers from the ED officers to the effect that they only
recover duty and do not investigate crimes like the ED officials. Even
otherwise, it is to be noted that even though Section 50 of the PMLA
may appear to be akin to summons issued under Section 18 of 1962
Act and other above-mentioned statutes, however, there is a deep
differentiation. For, when a person is summoned under the above-
mentioned Acts, such as the 1962 Act, he is not in the shoes of an
accused. He only becomes an accused once an FIR or complaint has
been filed before a Magistrate. This, however, he states, is not the
case under the PMLA. To drive home the point as to who stands in
the character of an accused, reference has been made to certain
Constitution Bench decisions of this Court, which have already been
118 For short, “CESA 1944 Act”

82
referred to by the previous learned counsel. To wit, Romesh
Chandra Mehta vs. State of West Bengal119
, Balkishan A.
Devidayal vs. State of Maharashtra 120
and Selvi121.
(i) Similarly, Mr. Ponda, learned senior counsel also relied on the
decision in Ramanlal Bhogilal Shah & Anr. vs. D.K. Guha &
Ors.122
and pointed out that even in cases of FERA, a person stands
in the character of an accused in a separate FIR for the same
transaction. He cannot be compelled to incriminate himself. He
maintains that this is a case wherein the ED itself had investigated
the accused under the FERA. It was found that even though
ordinarily under the FERA a person is not an accused, however, in
this particular case, an FIR had been registered against the said
person and he, being an accused, could not be compelled to answer
questions that would incriminate him. The same plea has also been
upheld in Poolpandi & Ors. vs. Superintendent, Central Excise
and Ors.123
. It was urged that an accused cannot be compelled to
119 (1969) 2 SCR 461 : AIR 1970 SC 940
120 (1980) 4 SCC 600 (also at Footnote No.41)
122 (1973) 1 SCC 696 (paras 2, 3, 4, 5, 11, 12, 17, 18-25)
123 (1992) 3 SCC 259

83
produce any incriminating documents which he does not want to
produce. Reliance was placed on State of Gujarat vs. Shyamlal
Mohanlal Choksi124
. Moreover, it is reiterated that the protection
against self-incrimination applies not only in Court proceedings, but
also at the stage of investigation125
.
(ii) Further, it was urged that Section 2(1)(na) of the PMLA defines
“investigation”. As such, proceedings under Section 50 is clearly a
part of investigation for the collection of evidence. The summons
under Section 50(2) is to give evidence or produce records during the
course of investigation under the Act, thus, protected by Article
20(3). Section 50(4) of the PMLA also stipulates that they are judicial
proceedings, therefore, a person accused will be protected under
Article 20(3). Section 63(2)(a) and 63(2)(c) inflict grave prejudice
upon the accused, as he is liable to be further prosecuted for the
failure to give information and provide documents which will
incriminate him. Our attention is also drawn to the usual practice
wherein persons are labelled as non-cooperative during the
124 AIR 1965 SC 1251 (and the Majority view from paras 23 onwards, relevant paras 32, 34 and
41)
125 Relied on Kathi Kalu Oghad (supra at Footnote No. 44), Nandini Satpathy (supra at Footnote
No.35), Selvi (supra at Footnote No.43) and Tofan Singh (supra at Footnote Nos.24 and 31)

84
proceedings which are judicial in nature and used as a pretext to
arrest or extend remand under the PMLA. It is a direct affront to
fundamental rights and a travesty of justice.
10. Mr. Siddharth Aggarwal, learned senior counsel, also
appeared for the private parties. His main opposition is to the
retrospective application of the PMLA. Certain questions are raised
with respect to whether prosecution for money-laundering is
permissible if the commission of scheduled offence and proceeds of
crime takes place prior to the PMLA coming into force; and, similarly,
in a situation when it is committed prior to the offence being made
part of the Schedule of the PMLA. It is submitted that the prohibition
against retrospective operation of substantial criminal statutes is a
constitutional imperative which needs to be given its fullest
interpretation in a purposive manner. He highlights the three
situations where interpretation is warranted. One, where
transactions were concluded prior to the enforcement of PMLA; two,
prior to the offences being added to the Schedule of the PMLA; and
three, whether amendment is applied with retrospective effect

85
couched in the guise of an Explanation introduced by the 2019
amendment.
(i) It is urged that no person can be convicted for criminal offence
unless it has been specifically given retrospective effect, given the
essential ingredient of ‘knowledge’ of the person for taking such an
action and exposing himself to criminal liability. In line with the
protection under Article 20(1) and the maxim of ‘nova constitutio
futuris formam imponere debet non praeteritis’126
, judgments of this
Court were relied to urge that the general rule is applicable when the
purpose of the statute in question is to affect vested rights/impose
new burdens/impair existing obligations127
.
(ii) To make good the submission on retrospectivity, it is pointed
out that as per the definition, money-laundering is dependent on
proceeds of crime, which in turn depends on criminal activity
relating to a scheduled offence. As such, it is stated that no proceeds
of crime can exist to be generated from a criminal activity unless the
126 Keshavan Madhava Menon vs. The State of Bombay, AIR 1951 SC 128 (para 15)
127 See : Soni Devrajbhai Babubhai (supra at Footnote No.98) (paras 8-10); Ritesh Agarwal &
Anr. vs. Securities and Exchange Board of India & Ors., (2008) 8 SCC 205 (para 25]; Harjit Singh
vs. State of Punjab, (2011) 4 SCC 441 (paras 13-14); Varinder Singh vs. State of Punjab & Anr.,
(2014) 3 SCC 151 (para 10); and Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika
Township Private Limited, (2015) 1 SCC 1 (paras 27-31)

86
PMLA comes into force. That too, it has to be connected to the date
when the Schedule has accepted the new predicate offence. It only
means that property which is not “proceeds of crime”, cannot by
virtue of PMLA, retrospectively characterised as such in a true sense.
Further, prior to the enactment of the PMLA, there was no similar
offence dealing in proceeds of crime or economic advantages derived
from criminal offences. He points out that there were various
enactments which dealt with the illegal fruits of criminal activity.
Thus, the PMLA cannot be added to the list of disabilities in law to
illegal monies in a retrospective manner. He was critical about many
amendments taken place over the years and especially the fact that
the true import of Section 3 is being expanded by a mere addition of
an Explanation in 2019. As such the purport of the main, a much
narrow provision, cannot be changed128
. None of the amendments
to Section 3 or changes in Schedule have a language bearing a
retrospective effect. Section 3 amendment was only “for removal of
doubts” in contrast with the amendment of Section 45 which was
128 Bihta Co-operative Development and Cane Marketing Union Ltd. & Anr. vs. Bank of Bihar &
Ors., AIR 1967 SC 389 (paras 5 & 7-8]; Dattatraya Govind Mahajan & Ors. vs. State of
Maharashtra & Anr., (1977) 2 SCC 548 (para 9); S. Sundaram Pillai & Ors. vs. V.R. Pattabiraman
& Ors., (1985) 1 SCC 591 (paras 27 & 45-53); Jagan M. Seshadri vs. State of T.N., (2002) 9 SCC
639; and Hardev Motor Transport vs. State of M.P. & Ors., (2006) 8 SCC 613 (para 31)

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